How Tier 2 towns are making digital EMIs the next big growth opportunity for Indian ecommerce

As ecommerce players look to expand their customer base deeper into India, the one medium that’s giving them a boost is the digital EMI.

Traditionally, equated monthly instalments have been used to buy big-ticket items, but high interest rates have made buyers wary of them. However, ecommerce biggies – keen to are expand to newer geographies across India – are now popularising digital EMIs, which, along with easy finance, now offer benefits such as quick approval, discounts, deals, cashbacks, and instant checkouts.

RedSeer estimates the total use of EMI as a percentage of the overall online commerce GMV at 7-9 percent, and the use of no-cost EMI as a percentage of overall GMV at 1-2 percent for the last quarter of 2017. But the consulting firm expects this number to have increased significantly in the last one year.

Ujjwal Chaudhry, Analyst at RedSeer, says online commerce sites have now become a common platform for digital EMIs. They offer digital EMI schemes, along with no-cost options, on debit cards, which have a higher penetration as compared to credit cards.

A February 2018 report by Boston Consultancy Group on ‘Digital Consumer Spending in India’ revealed that 9 percent of total non-metro online shoppers found easy EMIs a strong trigger for purchase.

Smaller towns – Tier II and Tier III – are the biggest beneficiaries of this product. Not surprising considering that smaller towns are now driving the growth of ecommerce in India, on the back of growing internet and smartphone penetration, and rising income levels.

Companies riding the digital EMI wave include Bajaj Finserv, Capital First, ZestMoney Snapmint, Kissht, and PayU Monedo. Apart from this, there are players like MoneyTap, which offers an app-based credit line, and PaySense, which focuses on short-term personal loans. Meanwhile, e-tail giant Amazon has introduced its own digital EMI scheme.

Small towns warm up to digital EMIS

Ujjwal says small-town customers have experienced EMI services from offline channels as well, which makes adoption easier. The added benefits and discounts offered with EMIs further sweeten the deal.

“Popular offline no-cost EMI players such as Bajaj Finserv and Capital First already have a huge customer base in smaller cities and towns. On-boarding these........